Continuation of last question, please. If the parent purchased the equipment in 2011 and never used it in their business (never reported on tax return), would the son, as the original user, be able to use Sec 168. I guess my question is: "does the son have to actually buy the equipment himself in order to get the Sec 168 Depr?" I realize he can't get Sec 179 with gifted property but I havn't found where he can't get Sec 168. Thanks for your help.
I have read "new" and "original user" in regards XX XXXXXXX 168(k). I think if you he was audited, he would have a hard time proving he was the "original user" of the equipment if he was gifted it from his parents who had a purchased it for their business.
This is why I believe there is little on related party transactions regarding this Section is because of the "original user" issue.
Thanks, I appreciate what you're saying. But if the son was the original user, that is to say that the parent bought the equipment for the exclusive purpose of giving it to his son as a personal gift and the son later converted it to business, could he take the Sec 168 Depr? I'm referring to Reg 1.168(k)-1(b)(3). I guess what I'm asking is can gifts be depreciated under Sec 168(k)? :) thanks
MTax, EA, QuickBooks Proadvisor. Over 10 years accounting and tax experience specializing in individual and small business.
I am doing additional research for you. I see your point as well.
Here is something I found. Under the original ARRA article on the IRS website, it says under "Property that does not qualify for special depreciation allowance includes the following" and bullet two says "...Property converted from personal use to business use in the same or later Tax Year may qualify"I am still researching.....I realize this is the IRS interpretation of the Code, but I have found in reading the IRS Publication 946 that for the 100% bonus depreciation it says "You must have acquired the property by purchase" while the 50% bonus depreciation down on page 32 says "you must have acquired the property". However, I don't see the word "purchase' in the statute unless there was additional guidance issued later.
So the gifted property will not work for 100%. But it might for 50%. OK, thanks
I don't see the word "purchase" in either 100% or 50% in the statute. I just see the word acquire. Again, unless additional guidance was issued later that I didn't see.
Oh, your saying the "statute" doesn't use the word "purchase." And the Pub 946 is just the IRS's interpretation. Sorry, I missread what you had said. Specifically, what Reg in 168 are you referring to? Thanks again
I thought the above question was resolved.
You asked for the Reg I was referring to and that was my response. I believe the question has been answered.